Perplexed by pensions? PensionBee makes saving for retirement easier

Why you should care about your pension pot

When you are young it is easy to think you have loads of time to save for your pension. However, time soon runs away with you, so the younger you start the better. A decent pension pot will give you so many more choices in later life and ensure you have a comfortable retirement.

By the time you hit your 40s and 50s, it is likely you will have several pension pots sitting with various ex-employers. I know I have! It can be hard to keep track of them and there may even be some you have forgotten about. It is really important to track these down when you are attempting to forecast what your pension pot is likely amount to. If you want to find a lost pension, the Pension Tracing Service may have contact details. Alternatively, PensionBee can help trace and transfer pensions.

I am now 55, so I am actively planning for my retirement. Ideally I would like to retire in 5 years time. Because I have pension pots all over the place I have decided to sign up with Pension Bee to get them all in one place and work out exactly what my monthly pension will be and when I can afford to retire. I can see whether I need to pay in more or whether I can afford to withdraw any early if I want to as well.

Calculating your income

I used the PensionBee calculator, and was pleasantly surprised to find that, if I continue contributing as much as I am currently, I will hit my target of an annual pension of around £24,ooo per year. This includes my state pension, which I won’t actually be able to claim until I am 67, however. To bridge the gap (and because I want to do some writing on a self employed basis anyway), I think some kind of part time work will be essential in my case.

The calculator gives you the opportunity to mess around with factors like your retirement age or adding a lump sum from an inheritance, for example. I might decide to keep working until I am 65, in which case my projected retirement income will increase to over £28,000 pa.

If it was a lot less than I was expecting, I could choose to start adding extra to the pot now. Perhaps I could scrape together another £100 a month to ensure a better retirement fund.

Please note, however, that the estimated retirement income the calculator gives you is a projection based on buying an annuity and is not a guaranteed income.

Some interesting stats

I am pretty happy with my projection, as according to PensionBee’s analysis the average pension pot across the UK is just £21,441. The situation is better or worse depending on which area of the UK you live in, with a clear north-south divide.

Women are generally predicted to be worse off than men in their retirement. The average female pension pot in the UK is only £16,083, whereas men have saved £23,416 on average, according to PensionBee. With more women working full time, this may improve in years to come, but we still tend to take on more caring and childcare responsibilities. This means more part time work, fewer opportunities for promotion and more career gaps.

I am glad now that I always chose to pay into a pension fund with pretty much every employer I have ever had.

As I am 55, I could withdraw 25% of my pension pot tax free. However, as I am still earning I have decided that this wouldn’t be the right option for me at the moment. I would urge you to get independent financial advice before withdrawing funds from your pension pot.

What will your state pension pay you?

It is also worth checking your state pension forecast, which you can do on the GOV.UK website here and you can also find out when you allowed to claim it here.

This is what mine tells me I will get, but I can’t claim until 2030! If you are young, I would say not to count on any form of state pension. It seems they are increasing the age you can claim all the time. My 26 year old daughter won’t be able to claim hers until she is 68!

Charges

PensionBee charge a single annual management fee, unlike some other providers who add all sorts of other fees that can eat into your pension pot if you aren’t careful. For more information on these fees, see here. PensionBee is authorised and regulated by the Financial Conduct Authority and is a member of the Association of British Insurers.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Related

Pensions are becoming increasingly important, as you say. I wasn’t told anything about them when I started working, but just automatically opted in figuring it wasn’t going to hurt. I shall definitely be encouraging mine to do so if/when they start earning, because it’s so easy to ignore something so far away in the future when you’re young!

DH (who retired a year ago at 57) is spot on the average thanks to an inheritance, but he also has work pensions that aren’t being drawn on yet.
Mine is going to be about £8000 as I stopped work to raise the kids! But with the money I get from renting our old house it will bring it back in line to the women’s average.
Ours (and my dad’s pension) are invested and both have lost a huge amount in the last year over the uncertainty surrounding the B-word! In my dad’s case he’s lost about 40% ! Ouch!

As we lived overseas for so long we’re both paying voluntary contributions towards our state pension at the moment. I think we should both just about reach the right number of qualifying years by the time we get to state pension age.

At the moment we are doing ok. I manage the monthly budget which keeps us comfortable with even some left over to save. I worry what food prices are going to do after March so have been stocking up a bit.

Wow ! 55 ! Never would have thought that, I am 8 years older than you but you easily look 20 years younger than me ! We have a pension income of about £13,000 a year which is my husband state plus a couple of small private ones, so not a great deal but we get by, I don’t get mine until I am 66 and then things will be better so I can’t complain,I see budgeting as a challenge and I know we are better off than a lot of people.

The similarities between Britain and Australia surprise me. Unlike you, we can’t blame Brexit for our shrinking pensions, terrible house prices and and higher jobless rate. But yes, I believe we have all these things, too.

I’ve recently put a bit of money in my superannuation, the Australian pension system. At the time I thought it may not have been the right thing to do. After reading your post, I now feel better about it. It looks like you’re on target for a quality retirement – I hope so, you’ve done the right thing and should be rewarded for it. Life aint always like that, but it should be!!

People who have been saving in a pension for some years need to bear in mind, when calculating their annual income post retirement, that if your company pension scheme was opted out of SERPS pre 2016 (and individuals may have had no choice in this), their state pension can be substantially reduced. My forecast shows that my state pension will be reduced by £100 month despite having the requisite years contributions for a full pension. If you continued to work after 2016 and paid NI then some of this can be recouped, but if you had taken early retirement from work then the only option is buying extra years but not everyone will be able to afford to do so.

I wrote to my MP about the unfairness of this. She siad, rightly, that I had benefited by paying (slightly) lower NI contributions for years. This is true. However, the savings amounted to less than £1,800. My state pension will, however, be reduced by £100 a month for the rest of my life, even though after 18 months the Government will have recouped the underpaid NI. It is a swizz indeed. And then there’s the six years pension lost from the age of 60 to 66 ………Grrrr!